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ABM Industries (ABM) Q2 Earnings: What's in the Cards?
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Leading provider of facility solutions, ABM Industries Inc. (ABM - Free Report) is scheduled to report second-quarter fiscal 2017 results after the markets closes on Jun 7. In the last reported quarter, adjusted earnings beat the Zacks Consensus Estimate by 5 cents. Over the last four quarters, earnings beat estimates thrice, with an average positive earnings surprise of 16.08%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
In order to fuel its growth momentum,the company embarked on a Vision 2020 Plan which outlines its vision for the next five years. It hinges on three primary phases, the first of which is aimed to increase the efficiency of the company through diligent execution of the operating plan and stringent cost-reduction activities. The second phase will focus on driving growth across the realigned verticals through effective realization of the cost savings from procurement, account management and other organizational changes. The final phase of the transformation will include accelerated growth impetus from the vertical alignment and account planning systems with a continuous focus on additional cost savings. ABM is currently focusing on the second phase of the plan and remains confident of achieving $40–$50 million in savings through operational efficiencies by the end of 2017. These systematic and strategic plans of actions are likely to help ABM fuel its growth momentum.
The company’s strategy entails growth through strategic acquisitions and organic growth while maintaining desirable profit margins. The company has a healthy pipeline of future businesses with strength particularly seen in its government business. ABM’s comprehensive, strategic and transformative initiatives are focused on driving sustainable profitability by effectively allocating resources to higher margin services and business verticals with a strong competitive edge. Management also stated that corporate restructuring initiatives are well on track to yield sustained long-term growth momentum. ABM has further reiterated its bullish fiscal 2017 guidance. For the fiscal year, it expects adjusted income from continuing operations in the range of $1.80–$1.90 per share on the back of recognition of higher-than-expected 2020 Vision savings.
However, as ABM has a significant presence in the U.K., it becomes difficult for it to increase revenues and reduce costs due to the highly unpredictable state of the European economy post Brexit. The company is likely to be stifled by the renegotiated deals and restrictions imposed on trade with other European Union members. Brexit could further result in higher tariff and non-tariff barriers to trade between the U.K. and the European Union, lowering the productivity of the company. Strong competitive pressures could also limit the company’s success rate in bidding for profitable businesses and its ability to increase prices in accordance with the rising costs.
Given the low cost of entry into the facility services business, ABM also faces intense competition from local and national players. Furthermore, the company faces indirect competition from building owners or tenants, who perform one or more of these services internally in order to cut costs, especially in the areas where external services are subject to sales tax. These strong competitive pressures could limit the company’s success rate in bidding for profitable businesses and its ability to increase prices in accordance with the rising costs.
Earnings Whispers
Our proven model does not conclusively show that ABM is likely to beat earnings this quarter as it lacks the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below:
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP:Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, currently stands at 0.00%.
Zacks Rank:ABM carries a Zacks Rank #3 which when combined with 0.00% ESP makes surprise prediction uncertain.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
ARI Network Services, Inc. (ARIS - Free Report) , expected to report earnings on Jun 8, has an Earnings ESP of +133.33% and a Zacks Rank #3.
Xactly Corporation , expected to report earnings on Jun 8, and has an Earnings ESP of +6.25% and a Zacks Rank #3.
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ABM Industries (ABM) Q2 Earnings: What's in the Cards?
Leading provider of facility solutions, ABM Industries Inc. (ABM - Free Report) is scheduled to report second-quarter fiscal 2017 results after the markets closes on Jun 7. In the last reported quarter, adjusted earnings beat the Zacks Consensus Estimate by 5 cents. Over the last four quarters, earnings beat estimates thrice, with an average positive earnings surprise of 16.08%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
In order to fuel its growth momentum,the company embarked on a Vision 2020 Plan which outlines its vision for the next five years. It hinges on three primary phases, the first of which is aimed to increase the efficiency of the company through diligent execution of the operating plan and stringent cost-reduction activities. The second phase will focus on driving growth across the realigned verticals through effective realization of the cost savings from procurement, account management and other organizational changes. The final phase of the transformation will include accelerated growth impetus from the vertical alignment and account planning systems with a continuous focus on additional cost savings. ABM is currently focusing on the second phase of the plan and remains confident of achieving $40–$50 million in savings through operational efficiencies by the end of 2017. These systematic and strategic plans of actions are likely to help ABM fuel its growth momentum.
The company’s strategy entails growth through strategic acquisitions and organic growth while maintaining desirable profit margins. The company has a healthy pipeline of future businesses with strength particularly seen in its government business. ABM’s comprehensive, strategic and transformative initiatives are focused on driving sustainable profitability by effectively allocating resources to higher margin services and business verticals with a strong competitive edge. Management also stated that corporate restructuring initiatives are well on track to yield sustained long-term growth momentum. ABM has further reiterated its bullish fiscal 2017 guidance. For the fiscal year, it expects adjusted income from continuing operations in the range of $1.80–$1.90 per share on the back of recognition of higher-than-expected 2020 Vision savings.
However, as ABM has a significant presence in the U.K., it becomes difficult for it to increase revenues and reduce costs due to the highly unpredictable state of the European economy post Brexit. The company is likely to be stifled by the renegotiated deals and restrictions imposed on trade with other European Union members. Brexit could further result in higher tariff and non-tariff barriers to trade between the U.K. and the European Union, lowering the productivity of the company. Strong competitive pressures could also limit the company’s success rate in bidding for profitable businesses and its ability to increase prices in accordance with the rising costs.
Given the low cost of entry into the facility services business, ABM also faces intense competition from local and national players. Furthermore, the company faces indirect competition from building owners or tenants, who perform one or more of these services internally in order to cut costs, especially in the areas where external services are subject to sales tax. These strong competitive pressures could limit the company’s success rate in bidding for profitable businesses and its ability to increase prices in accordance with the rising costs.
Earnings Whispers
Our proven model does not conclusively show that ABM is likely to beat earnings this quarter as it lacks the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below:
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP:Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, currently stands at 0.00%.
Zacks Rank:ABM carries a Zacks Rank #3 which when combined with 0.00% ESP makes surprise prediction uncertain.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Vail Resorts, Inc. (MTN - Free Report) , expected to report earnings on Jun 8, has an Earnings ESP of +3.41% and a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank stocks here.
ARI Network Services, Inc. (ARIS - Free Report) , expected to report earnings on Jun 8, has an Earnings ESP of +133.33% and a Zacks Rank #3.
Xactly Corporation , expected to report earnings on Jun 8, and has an Earnings ESP of +6.25% and a Zacks Rank #3.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana. Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>